Porn-trolling operation Prenda Law made its money filing copyright claims over illegal downloads of adult movies. Now, at least four judges want to see the money flow in the other direction—to the defense lawyers who have made short work of Prenda claims.

Prenda didn't only file copyright claims. In some cases, it also made hard-to-understand anti-hacking claims in state court, which led to some success for Prenda. In fact, the company was able to press on getting consumers' contact information even after it was sanctioned in federal court due to an Illinois anti-hacking case where a judge signed off on a broad discovery order.

But those state court cases aren't looking like a slam dunk anymore. The most recent expensive setback for Prenda comes out of the Guava LLC v. Merkel case. That's a Minnesota state court case where Prenda was accused of colluding with a "sham" defendant to get discovery.

Last week, Guava, along with the Alpha Law Firm it used to prosecute the case, was ordered to pay $63,367.02 in attorney's fees to five different law firms who defended the case. The order, published by the blog Fight Copyright Trolls, also bars anyone affiliated with Guava or Alpha Law from filing any more lawsuits in Minnesota state court without posting a $10,000 bond and getting approval from the Minnesota Secretary of State.

Alpha Law Firm is the law firm of Paul Hansmeier. He and John Steele are the two lawyers most commonly pointed to as the masterminds behind Prenda Law's many shell companies.

In all, Prenda has been ordered to pay $81,319.72 in sanctions by US District Judge Otis Wright; $9,425 in the Trinh case, which it failed to appeal; and $22,531 in the Navasca case, where US District Judge Edward Chen is also considering a motion for sanctions. Together with the Merkel fine, the grand total of Prenda-related fines—not including any interest that may accrue during an appeal—is $176,642.74.

Beyond what they're bonded for, the company profits from the trolling have probably long since been funneled out (i.e. each lawyer in the corporation makes >$1 million/year as a "fair wage"), and they will find a way to drag out appeals long enough for key players to get out of the company.

Is a paper victory an empty victory? At the end of the day, the copyright troll still gets the girl (the money).

Yeah, I was pretty much thinking the same thing, aside from the money that's already posted in bonds. With Prenda disolving, I'm not so sure there would be any assets left for them to pay out additional fines.

I'm asking because I don't know, but could the courts go after the key individuals directly for fines, or would it end at the corporate level? I'd be inclined to think the individuals have some protection from the corporate veil.

The profits from the trolling have probably long since been funneled out, and they will find a way to drag out appeals long enough for key players to get out of the company.

The "funneling out" is potentially unlawful, which means a serious inquiry could break them wide open. That sort of thing might not happen...but pissing off a federal judge is one of those things that just so happens to increase the likelihood that it does. The more they don't pay and appeal foolishly, the harder Judge Wright is likely to push back. Even if they funneled money out, I think these judges are the sort to keep tabs on people just in case there's reason to believe they're trying to bring it back in.

The "funneling out" is potentially unlawful, which means a serious inquiry could break them wide open. That sort of thing might not happen...but pissing off a federal judge is one of those things that just so happens to increase the likelihood that it does. The more they don't pay and appeal foolishly, the harder Judge Wright is likely to push back. Even if they funneled money out, I think these judges are the sort to keep tabs on people just in case there's reason to believe they're trying to bring it back in.

This is just one settlement that is being litigated.

Keep in mind Prenda has made millions off tons of other settlements (supposedly), and I'm sure the partners are being paid handsomely (7 figures) for their involvement as employees.

Yeah, Prenda is bonded. For this one lawsuit. But once the company is bankrupt, how much you can go after the lawyers involved depends how well they filed the company paperwork (and whether the IRS investigation yields anything fruitful).

I'm asking because I don't know, but could the courts go after the key individuals directly for fines, or would it end at the corporate level? I'd be inclined to think the individuals have some protection from the corporate veil.

Ordinarily they might be protected. But when the corporation is specifically designed as more of a money laundering scheme, that protection can go away. Otherwise, you'd probably see a bunch of LLCs for meth labs or something.

On the bright side, the fact that the secondary law firms are getting hit hard by these orders is a good thing. Considering that I'm sure Steele, et al. would love to just continue with different schemes, just by contracting with other lawyers, with any luck, potential future collaborators will be able to do a quick Google search to see that they're frequently the ones left holding the bag, and tell them to go fuck themselves.

And sadly for thousands of other people this does nothing to make them whole.Would be nice if the Justice system stopped patting itself on the back with fines for lying to the courts, and started moving forward with criminal cases.If I lied to a court in court, pretty sure I'd get jail... not sent to my room without dinner and told to pay back a small amount of the cash I extorted.

And when will we find out what the IRS has to say in their investigation?

When the wrath of the IRS hits Prenda like the fury of an exploding sun.

That assumes they did anything illegal.

The IRS might well, and unfortunately correctly, find that within their domain nothing was done incorrectly. The issue of where the money went would then be punted back to the courts.

Which isn't to say I wouldn't snicker at seeing the various malign actors in this case get hauled into prison by the IRS for tax shenanigans, in addition to being fined into the poor house by the courts.

If the US Attorney finds that Prenda was set-up and run as a corrupt enterprise, RICO can be applied. Under RICO the principles of Prenda can have their personal assets siezed BEFORE a trial ever takes place.

$176K and change? No problem. That's just 60 successful extortion letters as $3K a pop. An afternoon's work, really.

Simply awarding attorney's fees in this case is yet another example of the failure of the U.S. legal system to hold attorneys accountable. Judges aren't interested in pursuing (other) lawyers; I guess collusion isn't worth their time? It is utterly disappointing that judges like Wright are the exception to the rule.

$176K and change? No problem. That's just 60 successful extortion letters as $3K a pop. An afternoon's work, really.

Simply awarding attorney's fees in this case is yet another example of the failure of the U.S. legal system to hold attorneys accountable. Judges aren't interested in pursuing (other) lawyers; I guess collusion isn't worth their time? It is utterly disappointing that judges like Wright are the exception to the rule.

This is why it's so important for public attention to come to this case, so people know that Prenda has no legal legs to stand on and they don't have to tremble when they receive one of those letters, but rather fight back and refuse to pay them one damn dime of their blood money.

The scam must end, and that starts with cutting off their extortion cash income.

I don't know why people continue to believe that the Prenda people have somehow masterfully funneled all of the money out of the reach of anyone who would come after them. Nearly all of their wounds (Cooper signature, disaster depo, the Lutz court jester, Salt Marsh signature, etc) are entirely self-inflicted, and evidence more of dumb criminals than criminal masterminds. I expect their management of the settlement money has been equally inept, and I don't see any evidence to the contrary.

$176K and change? No problem. That's just 60 successful extortion letters as $3K a pop. An afternoon's work, really.

Simply awarding attorney's fees in this case is yet another example of the failure of the U.S. legal system to hold attorneys accountable. Judges aren't interested in pursuing (other) lawyers; I guess collusion isn't worth their time? It is utterly disappointing that judges like Wright are the exception to the rule.

It's not that judges aren't interested in pursuing other lawyers. It's that the legal system is not setup for judges to take on the roll of roving prosecutor/police. They handle what is specifically presented to them. Judge Wright referred the matter to the law enforcement agencies that do have the power to investigate criminal matters. If nothing comes out of that, the failure will be with those agencies not interested in pursuing lawyers, not with the judges.

Do we have any clue how much they took in ? This feels like negligible amounts, same as for the traders and bankers who ruined our economy...

The fines are negligible compared to what they extorted already. However, they may be significant compared to working cash Prenda kept visible. After setting up sham shells to evade taxes, the Prenda gang can't now expose more money than they can claim was spent to cover expenses. A string of unplanned judgements could cause problems for them, since they can't expose a paper trail to the hidden money.

They are delaying as much as possible while continuously extorting more money from more victims. If this tactic works, they may be able to use only that income, and not have to expose the hidden millions.

The amount extorted as of a year ago appears to be about $15,000,000, plus the amount extorted since then. Since blackmail victims are as as eager as Prenda to keep things quiet, Prenda gets away with demanding low-profile money, such as money orders made out as they direct, to make money disappear.

$176K and change? No problem. That's just 60 successful extortion letters as $3K a pop. An afternoon's work, really.

Simply awarding attorney's fees in this case is yet another example of the failure of the U.S. legal system to hold attorneys accountable. Judges aren't interested in pursuing (other) lawyers; I guess collusion isn't worth their time? It is utterly disappointing that judges like Wright are the exception to the rule.

Which might be why the shell cooporations have to now submit a $10,000 bond in some cases and are flat barred from action in some states.

I think the shell companies Prenda lawyers have so thoroughly shielded themselves with will start to crumble when the criminal investigators release their findings. Its a slow process though.

If PRENDA and Guava was colluding.. why did the judge let them off the hook?

"6. John Steele, Esq., Paul Hansmeier, Esq., Prenda Law, Inc., Live Wire Holdings LLC,and the Anti-Piracy Law Group shall not be liable to any Non-Party John Doe or Non-Party ISP for Attorneys’ Fees and Costs"

$176K and change? No problem. That's just 60 successful extortion letters as $3K a pop. An afternoon's work, really.

Simply awarding attorney's fees in this case is yet another example of the failure of the U.S. legal system to hold attorneys accountable. Judges aren't interested in pursuing (other) lawyers; I guess collusion isn't worth their time? It is utterly disappointing that judges like Wright are the exception to the rule.

This is why it's so important for public attention to come to this case, so people know that Prenda has no legal legs to stand on and they don't have to tremble when they receive one of those letters, but rather fight back and refuse to pay them one damn dime of their blood money.

The scam must end, and that starts with cutting off their extortion cash income.

They already were caught using a defunct business name to cover up that it was being paid to Pretenda once before. Until they are in jail or the courts force them to halt all activities they will continue. They have long lists of names gathered from many cases across the country and they can keep working them. I am aware of only a single Judge telling them they could not use the information gathered, and they flipped that Judge off (DC IIRC) and filed named cases in AZ against names obtained from that court.

Fraud, Perjury, Collusion, Extortion...I'm starting to wonder if they will keep getting a pass until they pull out a gun and point it at a Judge.It is getting very hard to not pretend we all face the same laws in this country. It is clear that there is a high court/low court system working here, and more people should be outraged, demanding answers, and making them fix the system.Get caught with crack, go to prison. Steal MILLIONS of dollars by defrauding the courts, get some fines and the ability to keep collecting more cash.

If PRENDA and Guava was colluding.. why did the judge let them off the hook?

"6. John Steele, Esq., Paul Hansmeier, Esq., Prenda Law, Inc., Live Wire Holdings LLC,and the Anti-Piracy Law Group shall not be liable to any Non-Party John Doe or Non-Party ISP for Attorneys’ Fees and Costs"

Because they told the court they had nothing to do with that company, and these nice boys would never lie.

"bars anyone affiliated with Guava or Alpha Law from filing any more lawsuits in Minnesota state court without posting a $10,000 bond and getting approval from the Minnesota Secretary of State."

Basically saying that anyone involved in the above, should they wish to try the same scam again regardless of who, or what company they work for, will have to pay $10,000 bond, and ask permission. And I imagine this would be a case by case basis as well. Not collectively trying it on with a 10,000 john doe's.

In other words, that is the end of those scammers, permanently.

As it's been said by others in the comments, what happens next, isn't in the hands of the judges. Although, I'm pretty sure if the other side do it by the book, they'll be judges handing out justice, sure enough. But for now, it's put an end to them. Unless they are prepared to get clients willing to put up a bond of $10k for every "alleged" infringer....

And when will we find out what the IRS has to say in their investigation?

When the wrath of the IRS hits Prenda like the fury of an exploding sun.

Considering the IRS Criminal Investigation Unit have, according to the IRS own website, a 90% conviction rate on Federal tax prosecutions, this is absolutely true. A 10% chance of survival against them? Ouch.

If one day they bring charges against Prenda et al, I would be willing to bet the 90% chance will win out.

Alpha and Guava are required to jump through hoops. After the Prenda group incorporates Beta Law Group and Mango, Inc. in Minnesota, they will simply ask their 'friends' at Alpha for leads and start a new game.

The sanctions don't apply to the associates and employees, only the corporations. At least that is how this article reads.

Missed the "and affiliated with" part. They will have the partners who did not sign on with these two take the lead as the lawyers from Beta and Mango. A relatively narrow ruling leaves plenty of room for a multi-state gang to operate.

The problem is deeper than the legal system is ready to fix at this point. While federal and state courts apply band-aids in the form of relatively modest sanctions, Prenda's principals have already made off with the loot of numerous ill-gotten settlements.

When it comes to making this situation truly just, what is lacking is a ready ability to look past corporate form (whether truly corporate, or LLC) and pursue the principals as individuals for their anti-social conduct. RICO is a difficult tool to use, and piercing the corporate veil an extremely difficult tool to use, in the pursuit of the individuals who have wreaked such havoc with our system. New tools are in order.

If you weren't already furious with the Prenda series of cases, if you are a US citizen your tax dollars, through their support of the federal courts have been co-opted by Prenda and their ilk. The cases they file clog up the docket and occupy the valuable time of judges and support staff, and the bill is presented to the US taxpayer.

The problem is deeper than the legal system is ready to fix at this point.

Realistically, "at this point" includes the foreseeable future. I personally suspect that all institutions are unfit to the real tasks now at hand, and no amount of revision will suffice to adapt them. Justice has always been a lovely ideal, but very seldom achieved.

I think this idea applies to all human institutions. We have reached a level of complexity and scale that overwhelms all previous types of institutional structure. And we haven't developed alternatives of some form yet, indeed we have scarcely a notion of what might replace them, to the extent that most people reading this will think I'm simply nuts for even suggesting that humanity must necessarily move beyond having institutions as we know them. We're trapped in the bitter end of the past. Courts will never become properly able to dispense justice, any more than Kings and Queens can dispense democracy.

Get caught with crack, go to prison. Steal MILLIONS of dollars by defrauding the courts, get some fines and the ability to keep collecting more cash.

Drugs are bad, mkay? If you do drugs, you're bad. So don't be bad, mkay?

Seriously, though - as others have pointed out, these guys have made some seriously stupid mistakes. Unless they're all savants, I can't imagine they're all that smart about hiding the money (cue Paul Hansmeier whipping the tarp off a large cubic object. It's a big pile of cash, and John Steele is staring at it in awe).

Really hoping the IRS does find them doing dirty - without that, they won't go to prison as they so richly deserve.

On another note, this does sort of prove my idea that the safest bet as a person is to incorporate as an LLC and no longer do anything as an individual. Things go bad, dissolve the company, walk away clean and start over. As long as you don't piss off any judges, should be good times.